Debt Olympics – Canada Wins Bronze!

On a global level, growth is being steadily drowned under a rising tide of debt, threatening renewed financial crisis, a continued squeeze to living standards, and eventual mass default. In summary, this is the conclusion of the latest “Geneva Report”, an annual assessment informed by a top drawer conference of leading decision makers and economic thinkers. A full copy of the report can be found here: http://www.cepr.org/sites/default/files/news/Geneva16.pdf

Aptly titled “Deleveraging? What Deleveraging?”, the report points out that, far from paying down debt since the financial crisis of 2008/9, the world economy as a whole has in fact geared up even further.

Contrary to widely held assumptions, the world has not yet begun to de-lever. In fact global debt-to-GDP (public and private non-financial debt) is still growing, breaking new highs by the month.

There was a brief pause at the height of the crisis, but then the rise in the global debt-GDP ratio resumed, reaching nearly 220% of global GDP over the past year. Much of the more recent growth in this headline figure has been driven by China, which in response to the crisis, unleashed a massive expansion in credit.

However, even developed market economies have struggled to make progress, with rising public debt cancelling out any headway being made in reducing household and corporate indebtedness.

In fact Canada happens to win the bronze medal for the most indebted nation on the planet when measuring debt as a percentage of GDP at 284% (89% government and 195% private debt). Japan takes the gold while Sweden picks up the silver.

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